International Tax & Business Advisory Services Firm

“We are what we repeatedly do.

Excellence, then, is not an act, but a habit”

Masson de Morfontaine is a team of top tier tax advisors and business consultants specializing in international tax planningand corporate services. Based in Hong Kong, Shanghai (China) and Montevideo (Uruguay), our team offers consultingservices in English, Mandarin, Cantonese, French, Russian and Spanish.

WHY MASSON DE MORFONTAINE?

Our East - West expertiseWith Western management and experience of dealing with both Western and Eastern countries’ jurisdictions, we becameflexible and integrated both mindsets and practices into our offering. This ensures that our customers receive the best valuefor their money: we work out pragmatic solutions for complex tax and business issues based on deep local knowledge and,at the same time, on thorough understanding of our clients’ expectations.

Our client approachThe starting point, or first step, in our project work is to clearly determine client’s engagement objectives based on his needs,specifics of the business and other relevant circumstances.We aspire to deliver timely and cost-effective business or tax advice that precisely meets client’s objectives. We reject a “onesize fits all” approach that simply recycles old advice for the new client. Our clients range from listed companies to smallbusinesses that enter a foreign market for the first time and each of them requires unique advice tailored specifically to meettheir priorities.

Support at every stepWhether you need to streamline existing operations or to start a new project, Masson de Morfontaine providescomprehensive assistance at every stage of your proceedings:

Developing and shaping your ideas Planning and structuring your business and tax position Comprehensive transaction support Project execution Continuous post execution follow up

How we serve the societySome of our advisers have played an instrumental role in the development of fiscal and business environment in the regionswhere we operate. We advised government authorities and chambers of commerce on such international tax issues as:

tax treaties and double tax agreements trade and investment agreements incentives to encourage investment introduction of new tax and competition laws establishment of free trade and investment zones

Our worldwide network of reputed independent tax advisors and business consultantsBased in over 100 countries, our trusted global partnerships ensure for our clients the most relevant advice for anyjurisdictions and seamless international expansion across any borders.

OUR SERVICES

Corporate servicesCorporate structuring to implement tax & business planning on all continents, including company formation, joint ventures,franchises, trademark registration, labour contracts and ancillary services, shareholder and agency agreements.

International Tax PlanningTax planning solutions throughout the investment cycle including entry, financing, operation, internal re-organization,profit repatriation and exit, helping to withstand the tax challenges and maximize tax value creation opportunities.

Transfer PricingRelated party filing, contemporaneous documentation, advance pricing arrangements, transfer pricing investigations, costsharing arrangements, tax aligned business model optimization and transfer pricing due diligence.

Mergers & AcquisitionsCross-border and domestic M&A transactions.

Tax Dispute ResolutionAll stages of disputes, from controlling the flow of information during audits to representing client in court, appeals andalternative dispute resolution proceedings.

Global MobilityRemuneration planning and compliance for expatriate employees, including employment structures, equity basedcompensation or other incentive awards, severance arrangements and tax audits.

High Net Worth Individuals servicesInvestments in overseas countries by way of formulating and implementing efficient tax structures as well as relatedcompliance matters.

Immigration / Second passportCitizenship by Investment Programs (CIP) in Europe and the Caribbean region.

TrustTrustee services in terms of establishment and administration of the trust through Hong Kong, New Zealand, Singapore,BVI and other major offshore jurisdictions.

ABOUT HONG KONG

Political status: Special Administrative Region (SAR) of the People's Republic of China

Total area: 1 104 km²

Languages: Chinese and English. English is widely spoken in the government and business sectors

Population: 7.24 million

GDP: 309.93 billion USD (2015)

Currency: Hong Kong dollar

Types of companies you can opt for:

Limited Company Branch Office of Parent Company Representative Office

COMPANY REGISTRATION PROCEDURE

Hong Kong’s appeal as a perfect business destination can be attributed to the ease of opening here a company. You don’tneed to be in Hong Kong, everything can be arranged by email and courier. However, if you are already here, the entireincorporation procedure can be completed even faster, usually in one week.

All you need is to decide on: Company name. We can help you to search for the available company names. Company type. Most of the companies registered in Hong Kong are Limited Companies. Company structure. Most of the limited companies incorporated in Hong Kong are private companies limited by

shares.

We will then help you to register your business with the Business Registration Office of the Hong Kong Inland RevenueDepartment. It is compulsory in accordance with Hong Kong law to register within one month of starting business. Tosimplify the process of setting up a limited company any application for company incorporation includes a simultaneousapplication for business registration.

The Certificate of Incorporation and Business Registration Certificate will normally be issued within 4 working days.

Lastly, you can proceed to open a bank account for your company. We will advise you on what documents you need toprovide to the chosen bank. Banks in Hong Kong normally require a minimum deposit the amount of which varies betweendifferent banks.

WHY DO BUSINESS IN HONG KONG?

Hong Kong is referred to by several authoritative sources as the freest economy in the world. In 2016 the Heritage Foundationgranted Hong Kong the first place in the ranking for the 22nd consecutive year.

So what is in it for you, as a business owner?

Stable and transparent legal environmentBeing under Chinese sovereignty, Hong Kong enjoys a certain degree of freedom: the city has a fully independent judiciaryand English common law prevails in business affairs. This principle is summed up by its political motto “One country, twosystems”. As a Hong Kong business owner, you may expect corruption-free culture, secured property rights, sound bankingsystem and multiple government incentives for SMEs and start-ups.

Prime locationHong Kong is a first class international transportation hub and boasts its air and sea links not only with the Asia-Pacificregion, but also with Europe, North America, Middle East and Africa. Half of the world population lives within a 5-hourflight to Hong Kong. It is also ideally located for logistics and shipping of goods to/from China. This is one of the reasonswhy a lot of manufacturing companies have their factories in the Pearl River Delta, close to Hong Kong border.

Friendly to foreign investorsIn comparison to many other countries, Hong Kong doesn’t put a lot of restrictions on foreigners who want to open ordevelop their business here. A company, foreign or local, can be registered within one week, there is no restriction onamount of foreign capital or owner’s nationality and no foreign exchange control.

Immigration procedures for foreigners are also transparent and straightforward and employees can easily bring their spousesand children with them.

Low tax ratesHong Kong has one of the lowest tax rates for corporates and individuals in the world. The profits tax rate for foreign andlocal companies is the same - 16.5%. Hong Kong government recently announced that they plan to cut the profits tax ratesby half to 8.25% for eligible companies. Furthermore, global businesses are offered a wide range of tax incentives, so thefinal tax bill may be even lower. Moreover, Hong Kong-registered company that derives its profit from offshore is notrequired to pay tax on this profit in Hong Kong.

The standard rates of salaries tax and property tax are both 15%, which is also quite low by international standards. Inaddition, Hong Kong has no VAT, no capital gains tax, no withholding tax on dividends and interest.

Skilled workforceAdaptable, entrepreneurial and English-speaking local workforce is an additional benefit for businesses investing in Asia.Apart from Cantonese language, the majority of local talent can also speak Mandarin, making business operations withMainland China even smoother.

CASE STUDIESCASE 1: Europeans making inbound investments in China via Hong Kong

Enjoying major benefits - using a Hong Kong company as a stepping stone:Background

1. Mr. A is from Italy with an Italian company "ITA Ltd"2. Business nature is about consumer products retail3. His business activity with China includes: investing in China to set up a Wholly Foreign Owned Enterprise (WFOE) lending money to the WFOE for its business operations in China

New arrangement1. Mr. A forms a Hong Kong company "H Ltd"2. Uses H Ltd as investor in China to set up a WFOE3. Also uses H Ltd to advance shareholder loan for the WFOE's business in China

Benefit1. Setting up WFOE Disclosing less information to the Chinese government: Originally, needs to provide information about the ITA Ltd to the Chinese government Now, just needs to provide information about the H Ltd

Time to arrange documents is shorter: ITA Ltd’s documents need to be translated into Chinese and certified by Chinese Embassy Documents from the H Ltd are more ready for use in China and the certification process is more standardized

in Hong Kong - time and costs are more controllable

2. Dividend from WFOE when the Chinese company earns profit and needs to pay back to investor, withholding tax in China applies if paying to ITA Ltd, the rate is 10% if paying to H Ltd, the rate is 5%

3. Interests from WFOE when WFOE needs to pay interests to ITA Ltd, withholding tax of 10% applies when WFOE needs to pay interests to H Ltd, withholding tax of 7% applies

Example: break-even Cost of setting up HK company = around HKD 10,000 Cost of annual maintenance of HK company = around HKD 20,000 (including accounting and audit fee) If dividend is HKD 300,000 and interest is HKD 167,000 saving 5% of withholding tax on dividend = HKD 15,000 saving 3% of withholding tax on interest = HKD 5,010 the total tax savings break even the maintenance of Hong Kong company

Case 2: Chinese high net worth investors making property investment inPortugal under the Golden Visa Regime

Benefit of corporate ownership for property valued over €1 million.

Generally, when a property values below €1 million it is advisable to keep it as a privately owned property. There will becosts involved for the corporation owning the property and it may not be so financially viable. However, if the propertyvalues over €1 million, corporate property ownership in Portugal may be more beneficial.

The table below shows some of the costs involved for a non- resident of Portugal in the buying, selling and owning propertyin Portugal valued at €1 million and over.

Costs involved in buying a property valued at 1 million euro and over by a non-resident of Portugal

Cost Privately Owned CompanyWhite-listed corporate

ownership of a property(e.g. Malta, Delaware)

Black-listed corporateownership of a property(e.g. BVI, Isle of Man)

Property purchase costs(IMT)

6% Purchase Tax (IMT) No IMT 8% Purchase Tax (IMT)

Stamp Duty 0.8% Stamp Duty No Stamp Duty No Stamp Duty

Legal fees on purchase &sale

1 to 2% 1 to 2% 1 to 2%

Capital Gains Tax on sale ofproperty

25% on the profit(in Portugal)

None to be paid in Portugal None to be paid in Portugal

Annual company runningcosts

None Between €1,500 and €3,750 Between €1,500 and €3,750

Annual property Tax (IMI).This is calculated on theproperty rateable value

Revalued since 2004(0.2 to 0.4%)

| Not valued (0.4 to 0.7%)

Revalued since 2004(0.2 to 0.4%)

| Not valued (0.4 to 0.7%)

1.00%. Or 2.00% if theproperty is not inhabited for

more than one year.

Annual fiscalrepresentation

€250 €425 €425

HOW TO SET UP A COMPANY IN CHINA

Types of Wholly Foreign Owned Enterprise (WFOE)Under the current Chinese law there are three distinct WFOE setups:

1. Service (or Consulting) WFOE2. Trading WFOE (or Foreign-invested Commercial Enterprise, “FICE”)3. Manufacturing WFOE

Trading WFOEs and Manufacturing WFOEs must derive the majority of their revenue from that main business, but can alsoprovide associated services. Meanwhile, some Service WFOEs can also conduct trading activities related to their services.When applying to set up a WFOE, the business scope must be specified in the application. The business scope is a onesentence description of the business activities in which a business will engage, and will appear on the business license.

Registered capitalRegistered capital is the initial investment into a company that is required to fund its business operations until it is in aposition to fund itself. The absolute minimum capital requirements under Chinese law are RMB 30,000 for multipleshareholder companies and RMB 100,000 for single shareholder companies. In practice, however, the official requirementsfor registered capital vary by industry and region.

Registered capital contributions can also be made in-kind (e.g., machinery and equipment, industrial property rights, know-how). Any machinery and equipment contributed must be necessary to the production of the WFOE concerned and valuatedat normal market price.

Registration processThe application process to create a company in China generally takes 3 to 6 months. The establishment process variesbased on the WFOE form and the planned business scope. For example, a Manufacturing WFOE will require anenvironmental evaluation report, and Trading WFOEs will need to undergo customs/commodity inspection registration.The application process can be divided into two parts: Pre-registration – what happens before the company formally exists Post-registration – what happens after the company formally exists

Pre-registration1. Company name registrationThe company name can be translated from English by meaning and/or phonetically. Verification of feasibility of theproposed name by the local Administration of Industry and Commerce (AIC) will take a few working days. Only the Chinesename will be legally binding – the English name is not legally relevant for Chinese authorities. Note that the words “China”and “International” cannot be freely included in the Chinese name, and are subject to further requirements.

2. Issuance of approval certificate and temporary business licenseThe authorities will issue the approval certificate and temporary business license after assessing the followingdocumentation:

From the investor: Business license (certificate of incorporation – depending upon locations, this may need to be notarized in the

investor’s country of origin, and then translated into Chinese) Bank statement to demonstrate credit worthiness (from relevant bank in country of origin and translated into

Chinese) Photocopy of passport of the legal representative of the investor company

From the new company: About the new business – Name of the company, business scope, registered capital, business terms, lease contract About the legal representative – Photocopy of passport and passport-size photos About the directors – CVs, photocopies of passports and passport-size photos Feasibility study report – Outlining the estimated cash flow for the next three years Articles of association Environmental protection evaluation report (if applicable)

The approval certificate will be issued by the local office of the Ministry of Commerce (MOFCOM). Upon issuance, there isa 30-day limit for registering the company with the AIC, which then issues the temporary business license.

Post-registrationFollowing the issuance of the temporary business license, the WFOE would need to perform a number of formal registrationsat various Chinese government entities such as local tax authorities, including applying for carving various seals (or chops)in order to authorize documents on behalf of the company, as well as opening an RMB account for managing daily operatingexpenses and a foreign capital account for receiving foreign currency.

Tax registration in China is often regarded as onerous. Two separate taxation authorities exist (the state taxation bureau andlocal taxation bureau). Company founders are required to file tax registration only once, to either of these 2 authorities. Thestatutory time limit is 30 days from the date of receiving the approval certificate. The company must file the tax registrationform and the initial tax reporting forms. Together with those forms, the company submits a series of original corporatedocuments for review purpose. A number of follow-up visits are expected during the entire tax registration process beforeits completion and eligibility of issuing invoice (fa piao).

Trading and Manufacturing WFOEs are eligible to apply for an import and export licence when fulfilling some legal andcommercial criteria set forth in the Chinese law. Import duties, including custom tariff and importation VAT, are levied atboth general and preferential rates in China. The preferential rates apply to imports originating from countries or regionsthat have signed agreements with China containing reciprocal preferential tariff clauses, and the general tariff rates applyto imports originating from all other jurisdictions. However, if the State Council Customs Tariff Commission grants specialapproval, preferential tariff rates may be applied to imports that otherwise would be subject to the general rates. Toencourage foreign investment, foreign invested enterprises that meet certain requirements may be exempt from customsduties on the importation of machinery and equipment for self-use. For exports of goods, enterprises are allowable to claima VAT refund in normal circumstances.

CONTACT US

Email: info@masson-de-morfontaine.comWeb site: www.masson-de-morfontaine.com

HONG KONG

Unit 901-903 Level 9 Jubilee Centre18 Fenwick Street

Wanchai, Hong KongTel: +852 3953 4880Fax: +852 3953 4818

SHANGHAI

5th Floor, Somekh Building, Rockbund,149 Yuanmingyuan Road, Huangpu District

Shanghai 200002, ChinaTel: +86 21 3120 3208Fax: +86 21 3120 3050